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Middle East developer pulls out of Oz showcase project

The Australian government's showcase $2.6 billion Barangaroo project is struggling to find the money to proceed although the chief executive officer of the Barangaroo Delivery Authority, John Tabart, says he is confident it will go ahead.

Nakheel pulled out just before this week's deadline for bids and other bidders warned that finance is going to be hard to find. A spokesman for Nakheel said it had pulled out of a consortium with Leighton Holdings, Macquarie Capital Group and Mirvac known as the Sydney IFC consortium, to concentrate on its local market in the Middle East.

The three remaining bidders – Lend Lease and Westpac; Brookfield Multiplex; and Mirvac-Leighton-Macquarie have pointed out, however, that in the current climate finance could be difficult to secure. They say that they can provide development expertise but only limited funding. This could mean that the Australian taxpayer may need to foot a bigger slice of the bill than had been expected.

'I'm not nervous about the global financial crisis. I've been living it far longer than most Australians. This is a long term project,' declared a bullish Tabart.

But others are concerned about the future of the mixed use development planned for the northern end of Darling Harbour. Property analysts said that banks have been talking about being nervous about providing extra funding.

A preferred tender should be appointed in the middle of June, the winner announced in December and work proceeding early in 2010.

But concern continues to mount over the suburban office market in Sydney. There are several new projects under development yet tenancy rates are falling as the financial crisis takes its toll on staff numbers and company overheads.